Chen, George Shih-Ku (2009): Agglomeration economies and the location of Taiwanese investment in China.
Download (232kB) | Preview
We investigate the effect of agglomeration economies on Taiwanese greenfield investors' location choice in China from 1996 to 2005. Using a nested logit model, we find that Taiwanese investors first select a region in China where he or she wants to invest, before selecting the best province within that region. Furthermore, we find evidence that, since 2000, market access, industrial linkages and monitoring costs have become important agglomeration forces driving Taiwanese investors' location choice in China. Finally, we discover that the nature of agglomeration economies varies extensively for Taiwanese investors across different industries. Taken together, these findings suggest that the Chinese government must formulate region-wide development strategies and industry-specific policies if it wants to attract more Taiwanese investment in the near future.
|Item Type:||MPRA Paper|
|Original Title:||Agglomeration economies and the location of Taiwanese investment in China|
|Keywords:||Agglomeration economies; China; Nested logit model; Taiwanese investment|
|Subjects:||F - International Economics > F2 - International Factor Movements and International Business > F23 - Multinational Firms; International Business|
|Depositing User:||George Shih-Ku Chen|
|Date Deposited:||10. Mar 2009 05:47|
|Last Modified:||11. Feb 2013 20:42|
Agiomirgiannakis, G., Asterious, D. and Papathoma, K. (2003). The determinants of foreign direct investment: A panel data study for the OECD countries. City University Discussion Paper no.03/06 London.
Baldwin, R. E., Forslid, R., Martin, P. H., Ottaviano, G. and Robert-Nicoud, F. (2003). Economic Geography and Public Policy. Princeton, Princeton University Press.
Bao, S., Chang, G. H., Sachs, J. D. and Woo, W. T. (2002). "Geographic factors and China's regional development under market reforms, 1978-1998." China Economic Review 13(1): 89-111.
Barrios, S., Strobl, E. and Gorg, H. (2006). "Multinationals' location choice, agglomeration economies and public incentives." International Regional Science Review 29(1): 89-107.
Belderbos, R. and Carree, M. (2002). "The location of Japanese investment in China: Agglomeration effects, keiretsu, and firm heterogeneity." Journal of Japanese and International Economies 16(2): 194-211.
Ben-Akiva, M. and Lerman, S. R. (1985). Discrete Choice Analysis: Theory and Application. Cambridge, MA, MIT Press.
Bobonis, G. J. and Shatz, H. J. (2003). Agglomeration economies, investment promotion and the location of foreign direct investment in the United States PPIC Working Papers no.2003/17.
Boudier-Bensebaa, F. (2005). "Agglomeration economies and location choice: Foreign direct investment in Hungary." Economics of Transition 13(4): 605-628.
Braunerhjelm, P. and Svensson, R. (1996). "Host country characteristics and agglomeration in foreign direct investment." Applied Economics 28(7): 833-840.
Bronzini, R. (2004). Foreign direct investment and agglomeration: evidence from Italy. Bank of Italy Working Paper No.526.
Carlton, D. W. (1983). "The location and employment choices of new firms: An econometric model with discrete and continuous endogenous variables." Review of Economics and Statistics 65(3): 440-449.
Chang, S.-J. and Park, S. (2005). "Types of firms generating network externalities and MNCs' co-location decisions." Strategic Management Journal 26(7): 595-615.
Chen, C. (1997). Provincial characteristics and foreign direct investment location decision within China. Chinese Economic Research Centre Working Paper no. 97/16. The University of Adelaide.
Chen Chiu, L.-I. (1995). 'The pattern and impact of Taiwan's investment in mainland China'. Emerging Patterns of East Asian Investment in China: from Korea, Taiwan and Hong Kong. S. J. La Croix, Plummer, M. G. and Lee, K. Armonk, M.E. Sharpe.
Cheng, S. (2007). "Structure of firm location choices: An examination of Japanese greenfield investment in China." Asian Economic Journal 21(1): 47-73.
Cheng, S. (2008). "How can western China attract FDI? A case of Japanese investment." Annual of Regional Science 42(2): 357-314.
Cheng, S. and Stough, R. R. (2006). "Location decisions of Japanese new manufacturing plants in China: A discrete-choice analysis." Annals of Regional Science 40(2): 369-387.
Cheng, T.-J. (2001). 'The economic significance of Taiwan's democratization'. Taiwan's Economic Success Since 1980. Z. Mai and Shi, J. Cheltenham, UK Edward Elgar.
Chu, J. J. (1993). The Political Economy of Post-1980s Taiwanese Foreign Investment. Murdoch, WA, Asia Research Centre, Murdoch University.
Chung, W. and Alcacer, J. (2002). "Knowledge seeking and location choice of foreign direct investment in the United States." Management Science 48(12): 1534-1554.
Chung, W. and Song, J. (2004). "Sequential investment, firm motives, and agglomeration of Japanese electronics firms in the United States." Journal of Economics and Management Strategy 13(3): 539-560.
Coughlin, C. C. and Segev, E. (2000a). "Foreign direct investment in China: A spatial econometric study." World Economy 23(1): 1-23.
Coughlin, C. C. and Segev, E. (2000b). "Location determinants of new foreign-owned manufacturing plants." Journal of Regional Science 40(2): 323-351.
Coughlin, C. C., Terza, J. V. and Arromdee, V. (1991). "State characteristics and the location of foreign direct investment." Review of Economics and Statistics 73(4): 35-68.
Cramer, D. (2003). Advanced Quantitative Data Analysis. Maidenhead, UK, Open University Press.
Deichmann, J., Karidis, S. and Sayek, S. (2003). "Foreign direct investment in Turkey: Regional determinants." Applied Economics 35(16): 1767-1778.
Disdier, A.-C. and Mayer, T. (2004). "How different is Eastern Europe? Structure and determinants of location choices by French firms in Eastern and Western Europe." Journal of Comparative Economics 32(2): 280-296.
Driffield, N. (2000). "Industrial performance, agglomeration and foreign manufacturing investment in the UK." Journal of International Business Studies 31(1): 21-37.
Driffield, N. (2002). "Determinants of inward investment in the UK: A panel analysis." Applied Economics 34(5): 555-560.
Driffield, N. and Munday, M. (2001). "Foreign manufacturing, regional agglomeration and technical efficiency in UK Industries: A stochastic production frontier approach." Regional Studies 35(5): 391-399.
Fujita, M., Krugman, P. and Venables, A. J. (1999). The Spatial Economy: Cities, Regions, and International Trade. Cambridge, MA, MIT Press.
Girma, S. (2002). "The process of European integration and the determinants of entry by non-EU multiantionals in UK manufacturing " Manchester School 70: 315.
Greene, W. H. (2000). Econometric Analysis. Upper Saddle River, NJ, Prentice Hall.
Guimaraes, P., Figueiredo, O. and Woodward, D. P. (2000). "Agglomeration and the location of foreign direct investment in Portugal." Journal of Urban Economics 47(1): 115-136.
Guimaraes, P., Figueiredo, O. and Woodward, D. P. (2003). "A tractable approach to the firm location decision problem." Review of Economics and Statistics 85(1): 201-204. Gujarati, D. N. (1995). Basic Econometrics. New York, McGraw-Hill.
Hansen, E. R. (1987). "Industrial location choice in San Paulo, Brazil: A nested logit model." Regional Science and Urban Economics 17: 89-108.
Hausman, J. and McFadden, D. (1984). "Specification tests for the multinominal logit model." Econometrica 52(5): 1219-1240.
He, C. (2003). "Location of foreign manufacturers in China: Agglomeration economies and country of origin effects." Papers in Regional Science 82(3): 351-372.
Head, K., Mayer, T. and Ries, J. (2004). 'Market size and agglomeration'. Multinational Firms' Location and the New Economic Geography. J.-L. Mucchielli and Mayer, T. Cheltenham, UK, Edward Elgar.
Head, K. and Ries, J. (1996). "Inter-city competition for foreign investment: Static and dynamic effects of China's incentive areas." Journal of Urban Economics 40(1): 38-60.
Head, K., Ries, J. and Swenson, D. (1995). "Agglomeration benefits and location choice: Evidence from Japanese manufacturing investments in the United States." Journal of International Economics 38(3): 223-247.
Head, K., Ries, J. and Swenson, D.(1999). "Attracting foreign manufacturing: Investment promotion and agglomeration." Regional Science and Urban Economics 29(2): 197-219.
Hensher, D. A. and Johnson, L. W. (1981). Applied Discrete Choice Modelling. New York, Halsted Press.
Hilber, C. A. L. and Voicu, I. (2005). Agglomeration economies and the location of foreign direct investment: empirical evidence from Romania. 51st Annual North American Meeting of the Regional Science Association International.
Kang, S. J. and Lee, H. S. (2006). "The determinants of location choice of South Korean FDI in China." Japan and the World Economy doi:10.1016/j.japwor.2006.06.004.
Kinoshita, Y. and Campos, N. F. (2002). The location determinants of foreign direct investment in transition economies. William Davidson Institute Working Paper Group3-9 Kinoshita.
Krugman, P. (1991a). "Increasing returns and economic geography." Journal of Political Economy 99(3): 483-499.
Krugman, P. (1991b). Increasing Returns and Economic Geography. Cambridge, MA, MIT Press.
Lin, C.-C. S. and Png, I. (2003). "Monitoring costs and the mode of international investment." Journal of Economic Geography 3(3): 261-274.
Maddala, G. S. (1983). Limited-Dependent and Qualitative Choice Behaviour. Cambridge, Cambridge University Press.
Marschak, J. (1960). 'Binary choice constraints on random utility indications'. Stanford Symposium on Mathematical Methods in the Social Sciences. K. J. Arrow. Stanford, CA, Stanford University Press.
McFadden, D. L. (1974). 'Conditional logit analysis of qualitative choice behavior'. Frontiers in Econometrics. A. Zarembka, Lundqvist, L., Snickars, F. and Weibull, J. New York, Academic Press.
Meyer, K. (1998). Direct Investment in Economies in Transition. Cheltenham, UK, Edward Elgar.
Mucchielli, J. L. and Puech, F. (2004). 'Globalization, agglomeration and FDI location: the case of French firms in Europe'. Multinational Firms' Location and the New Economic Geography. J. L. Mucchielli and Mayer, T. Cheltenham, UK, Edward Elgar.
North, D. (1974). 'The process of locational change in different manufacturing organizations'. Spatial Perspectives on Industrial Organisation and Decision Making. F. E. I. Hamilton. London, John Wiley and Sons.
Ondrich, J. and Wasylenko, M. (1993). Foreign direct investment in the United States: Issues, magnitudes, and location choice of new manufacturing plants. W. E. Upjohn Institute for Employment Research. Kalamazoo, MI.
Qu, T. and Green, M. B. (1997). Chinese Foreign Direct Investment: A Subnational Perspective on Location. Aldershot, Ashgate.
Rees, J. (1974). 'Decision-making, the growth of the firm and the business environment'. Spatial Perspectives on Industrial Organisation and Decision Making. F. E. I. Hamilton. London, John Wiley and Sons.
Resmini, L. (2000). "The determinants of foreign direct investment in the CEECs: New evidence from sectoral patterns." Economics of Transition 8(3): 665-689.
Robert-Nicoud, F. (2002). New economic geography: welfare, multiple equilibria and political economy. PhD Thesis. London, London School of Economics.
Saxenian, A. L. (1994). Regional advantage: culture and competition in Silicon Valley and Route 128. Cambridge, MA, Harvard University Press.
Shaver, M. J. and Flyer, F. (2000). "Agglomeration economies, firm heterogeneity and foreign direct investment in the United States." Strategic Management Journal 21(12): 1175-1194.
Smith, D. F. and Florida, R. (1994). "Agglomeration and industrial location: An econometric analysis of Japanese-affiliated manufacturing establishments in automotive-related industries." Journal of Urban Economics 36(1): 23-41.
Sun, Q., Tong, W. and Yu, Q. (2002). "Determinants of foreign direct investment across China." Journal of International Money and Finance 21(1): 79-113.
Train, K. E. (2003). Discrete Choice Methods with Simulation. Cambridge, Cambridge University Press.
Tung, C.-Y. (2004). 'Made by Taiwan but made in China: the impact of Taiwanese businesspeople's outward investment in the information technology industry in China on their competitiveness and the Chinese economy'. China as a World Workshop. K. H. Zhang. New York, Routledge.
Wakasugi, R. (2005). "The effects of Chinese regional conditions on the location choice of Japanese affiliates." Japanese Economic Review 56(4): 390-407.
Wei, Y. and Liu, X. (2001). Foreign Direct Investment in China: Determinants and Impact. Cheltenham, Edward Elgar.
Wei, Y., Liu, X., Parker, D. and Vaidya, K. (1999). "The regional distribution of foreign direct investment in China." Regional Studies 33(9): 857-867.
Wheeler, D. and Mody, A. (1992). "International investment location decisions: The case of U.S. firms." Journal of International Economics 33(1): 57-76.
Woodward, D. P. (1992). "Locational determinants of Japanese manufacturing start-ups in the United States." Southern Economic Journal 58(3): 690-709.
Woodward, D. P., Figueiredo, O. and Guimaraes, P. (2006). "Beyond the Silicon Valley: University R&D and high-technology location." Journal of Urban Economics 60: 15-32.
Zhang, K. H. (2001). "What attracts foreign multinational corporations to China?" Contemporary Economic Policy 19(3): 336-346.
Zhou, C., Delios, A. and Yang, J. Y. (2002). "Locational determinants of Japanese foreign direct investment in China." Asia Pacific Journal of Management 19(1): 63-86.
Zhu, Y. (2005). Taiwan-Invested Enterprises in China (in Chinese). Tokyo, Toyo Keizai Inc.